SATOSHI NAKAMOTO had a vision of creating a peer-to-peer electronic cash system by utilizing blockchain technology.[1] He accomplished this by solving the double-spending problem[2] and allowing users to transfer value using the Bitcoin network. The Bitcoin network not only launched Bitcoin; it also launched Web 3.0. Previous versions of the Web included reading and later writing information to and from websites and applications like Facebook and YouTube. Web 3.0 allows users to transfer value and implement self-executing agreements.[3] Blockchain technology records a transaction on a decentralized ledger that cannot be corrupted without taking control of most of the network. This level of security, in turn, allows users to record transactions or ownership, like ownership of a digital currency or a non-fungible token (NFT), and permits secure self-executing agreements (smart contracts) and actions to be taken based on those transactions.

This article explores how current patent law applies to Web 3.0 and blockchain technology development and some of the challenges companies and inventors using blockchain protocols may face when seeking patent protection.

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Patent Landscape

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Blockchain protocols rely on decentralized networks to accomplish genuine peer-to-peer transactions, and many of these networks are therefore open-source (i.e., released under a copyright license for free public use). Because they used open-source code, much of the technology related to the most prominent blockchain protocols have never been patented[4], but other companies have applied for and acquired patents on uses of these protocols. As the Bitcoin network is over 12 years old, patent applications related to blockchain are not new, and over 2,000 patents have already been issued in the United States. Some of the largest patent owners are in industries blockchain promises to disrupt – banking, finance, and software.[5]

For example, Bank of America, one of the largest patent-holders in blockchain technology, has recently-issued blockchain patents relating to cash ATMs[6] and multiplexing.[7] Sony has filed for a patent related to using cryptocurrencies for in-game betting.[8] That technology would allow users to place a wager using Bitcoin or other virtual currencies during a computer simulation. And not all blockchain protocols use open-source software. For example, VeChain, a blockchain technology company that has developed a protocol focused on tracking products from production to consumer purchase, has filed a patent application related to recording carbon trading using a blockchain protocol.

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Acquiring Patent Rights

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Under U.S. law, a patent owner has a right to exclude others from profiting from their new, useful, and non-obvious invention.[9] But the first key challenge faced by those seeking patent protection for blockchain-related inventions will be proving their subject matter is patentable (rather than simply an abstract idea), and another will be providing an adequate written description of the claimed invention. In the recent Alice Corporation case, the U.S. Supreme Court established a two-part test to determine whether a software patent claims patentable subject matter.[10] In its 2019 guidance applying Alice, the U.S. Patent Office states that patentable software claims must recite meaningful limitations that improve on a technology and have a practical application that the human mind cannot simply perform itself.[11] And under the written description requirement, a patent must describe the invention it seeks to claim in enough detail that those skilled in the relevant technology can readily determine the scope of the patent claims.[12]

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Companies and inventors preparing to file a patent application relating to blockchain technology should draft meaningful claim limitations that both improve on the previous technology and have a practical application that the human mind cannot simply perform. To be “meaningful” by this standard, a claim limitation must be specific and recite structures, steps or acts beyond broad general statements claiming the use of blockchain to accomplish a specific goal (i.e., mere implementation via a blockchain). Further, for the patent claims to be valid, the application should include a complete description of the blockchain technology and its use to meet the written description requirement.

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As one example, consider Sony’s patent application (note 8, above) on a method for placing a wager in a virtual simulation, including with virtual currencies like Bitcoin. The patent application does not try to patent a blockchain or Bitcoin itself, but rather claims the use of a virtual currency to place bets in real-time during a game. This patent application includes specific claim limitations that accomplish real-time tasks in the non-digital world and improves on existing online betting technology. The claims do not seek to monopolize all possible uses of blockchain for online betting; the specific claim limitations leave room for other methods for online betting using virtual currencies.

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In another example, consider Bank of America’s patent on a system for multiplexing and demultiplexing[13] two or more blockchains (note 7, above). The patent claims do not recite simple limitations broadly claiming the use of blockchain technology, but instead incorporate multiple meaningful limitations. Those limitations include specific steps setting forth how the claimed invention multiplexes and demultiplexes multiple blockchains, and how the claimed invention detects, publishes, and generates the data related to a blockchain. The claims do not seem to be overbroad; other methods, not covered by the recited claim limitations, may exist to accomplish a similar outcome. These examples show how those inventors seemingly avoided some of the pitfalls facing blockchain patents and software patents in general.

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Conclusion

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The development of the Bitcoin protocol by Satoshi Nakamoto launched Web 3.0 and a new way for users to interact. With new blockchain protocols allowing the transfer of value through peer-to-peer networks and the execution and implementation of smart contracts, the race is on to find and patent innovative ways to use these new features. Those innovators seeking patent protection should understand that patent law requires such inventions to be more than an abstract idea, and that the patent must include an adequate written description to define the scope of the invention. Simply put, Web 3.0 is here and wants its patent rights.

 

[1] https://www.economist.com/briefing/2015/10/31/the-great-chain-of-being-sure-about-things

[2] Chohan, Usman W., The Double Spending Problem and Cryptocurrencies (January 6, 2021). (The double-spending problem is a potential flaw in which the same single digital currency can be spent more than once.)

[3] Massimo Ragnedda & Giuseppe Destefanis, Blockchain and web 3.0: social, economic, and technological challenges (2020).

[4] Cade Metz, The Bitcoin Schism Shows the Genius of Open Source, Wired (2018), https://www.wired.com/2015/08/bitcoin-schism-shows-genius-open-source/ (last visited May 26, 2021).

[5] Tim Pohlmann, Who are the patent leaders in blockchain? RSS, https://www.iam-media.com/who-are-patent-leaders-blockchain (last visited May 26, 2021).

[6] U.S. Patent No. 10,142,312

[7] U.S. Patent No. 10,158,611

[8] U.S. Patent App. No. 2021/0142624

[9] 35 U.S. Code CHAPTER 10

[10] Alice Corp. v. CLS Bank International, 573 U.S. 208, 215 (2014)

[11] 2019 Revised Patent Subject Matter Eligibility Guidance (“2019 PEG”) published on January 7, 2019 (84 Fed. Reg. 50) (“If the additional limitations reflect an improvement in the functioning of a computer, or an improvement to another technology or technical field, the claim integrates the judicial exception into a practical application and thus imposes a meaningful limit on the judicial exception.”).

[12] 35 U.S.C. 112(a)

[13] In this context, multiplexing can be defined as “a circuit that allows the transmission of several signals at once over a single channel communication system.” Multiplexing, Collins Dictionary of Electronics. (2nd ed. 2004). Demultiplexing reverses that process: “separates signals that have been transmitted in combined form by a multiplexer.” Demultiplexing, Collins Dictionary of Electronics. (2nd ed. 2004).

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